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Wool market drops
Aug '11
The AWEX Regional Indicators finished a further 2.8% lower, on average, at sales in Sydney, Melbourne and Fremantle this week when the US exchange rate rose by 2.3%.

46,967 bales were on offer in a smaller sale, compared with 58,531 bales last week. 18.4% were passed in, comprised of 16.4% in Sydney, 17.3% in Melbourne and 26.9% in Fremantle. Pass-in rates for Merino fleece and skirtings were 22.5% and 14.0%, respectively.38,307 bales were cleared to the trade.

The US Exchange rate recovered significantly this week, rising from 102.70¢ last Thursday to close at just over 105¢ this Thursday. Some recovery from the over-reactive fall of the last two weeks was anticipated by financial analysts. The question now posed by analysts earlier in the week was how much the recovery might continue in coming weeks. They indicated that there is a large amount of watching, while attempting to get a feel for what will happen in the United States and European economies. But, a further loss of confidence saw the exchange rate fall to 103.38¢ at the RBA close on Friday.

The fall in the US exchange rate last week buffered Australian wool growers against the fall in the EMI in US currency then. That was reversed this week with the rise in the exchange rate resulting in a greater fall in the EMI in A$ than in US currency.

The market softened further this week when it opened on Wednesday, with the Merino types more severely affected than crossbred wools. Falls were recorded across all Merino micron ranges and types. Growers were more prepared to sell in the North, where the pass-in rate was 11.7%, but not in the South or the West where the pass-in rates were 20.1% and 21.9% respectively. The market eased again on Thursday, with the greatest effect at the fine end in the North. This led to a general increase in grower resistance to selling, when the national pass-in rate rose to 19.4% and the Western pass-in rate rose to 32.1%.

Overall, the greatest falls were at the fine and broader ends of the Merino micron ranges, with the 19 micron MPG the least affected.

Prices for skirtings followed the fleece types on Wednesday, as was the case on the first day of selling last week. Thursday's sale saw some early support for skirtings in the North. But, it was not maintained throughout the sale. The offering in the South on Thursday contained a large proportion of high VM wools which attracted limited support. Prices also eased further in the West on Thursday.

Crossbreds were the least affected, as occurred last week, with small falls in the 28 and 32 micron average AWEX MPGs and a 10¢ rise in the 30 micron average MPG. The 28, 30 and 32 micron average AWEX MPGs are the only MPGs above their season opening levels. Wool Services International also reported increases for New Zealand crossbred wool. Oddments were down on Wednesday, and were generally down on Thursday, except in the West where AWEX reportedthat locks and crutchings were 10¢ dearer. The average AWEX Merino Cardings Price Guide is 9.3% less than at the start of the season.

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